Snap Stock Analysis || Is Snapchat Stock Still a Buy?!

Snap!! Trading for 44 dollars and 20 cents a share as of October 25th 2020 equating to a market cap or capitalization of over 64 billion dollars.

It's been an absolutely crazy ride for snap investors this week as the company is up over 50% in a single trading week and 210% in the last year.

Snap Stock Analysis || Is Snapchat Stock Still a Buy?!

As most of you are already aware, Snap Stock has gone on a massive tear after reporting its third-quarter earnings, where they absolutely shattered expectations. Revenue surged 52% year over year to a whopping 679 million which beat estimates by 127 million dollars.

Along with this the company's net loss narrowed from 200 million and it generated an adjusted EBITDA of 56 million, compared to a loss of 42 million a year ago which is certainly a true highlight.

Snapchats daily active users grew 18% year over year to nearly 250million. The intriguing part about this is the fact that daily active users in North America stayed flat and remained slow in Europe however it's users in the rest of the world absolutely surged with a 43% increase year over year. Sadly Snap doesn't break down it's rest of world segment by individual country, however the company highlighted India as an area of strong growth, which as we mention in our previous Snap analysis one could have expected as TikTok was banned in the country in late June.

And the good news just kept coming as Snaps average revenue per user rose 28% year over year to 2 dollars and 73 cents. Which as you can see here when we look at the breakdown

Snaps average revenue per user in North America for Q3 2020 was $5.49 representing a whopping 61% increase Quarter over quarter following this European users on average raked the company in $1.43 and just 95 cents in its rest of the world category.

So critically what does this tell us. Even though Snaps daily active users in North America have remained relatively flat the fact that the companies average revenue per users rose 61% indicates users are spending more in Snaps ecosystem including filters, lenses, videos, games and it's other content which is offsetting it's slower daily active user growth.

Lets keep it moving, Snaps ECPM, or effective cost per thousand, impressions rose 20% year over year, marking it's first quarter of ECPM growth since the company went public. In layman's terms this means Snaps pricing power in the advertising space is improving, however an investor should take into consideration Snaps ecpm remained well below market rates which indicates it certainly has room to raise it's prices.

Finishing off the company's earnings call the company didn't provide exact guidance for the fourth quarter, but stated they would have 47-50% year over year revenue growth if the current favorable operating conditions persist.

Take into consideration many large investment funds are only able to invest in companies who are profitable, this is one of the reasons we've seen such a staggering rally in Snap. As large funds gain the ability to invest in the company they have chosen to pour billions of dollars into Snap in hopes the company continues to gain market share in the highly profitable social media space

And to be frank it's great to see Snapchat starting to get some love as I'm obviously way over generalizing but only millennials and gen z really understand how ingrained snapchat has become in our generations everyday life. A lot of these neigh sayers state Snapchat doesn't have a moat and will never be profitable, but i would have to disagree,

Yea TikTok is becoming absurdly popular but it's not a replacement to Snapchat. Yea Instagram tried copying Snapchat stories which clearly hasn't slowed the company down. Yea Facebook is much larger but once again it's not a replacement for Snapchat. If you ask most millennials their prefered way to communicate with friends it's most likely going to be Snapchat. That's a dopamine moat Baby


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